1. Technical Field
A “Quality-Based Ad Pricer” provides techniques for pricing advertisements, and in particular, various techniques for explicitly adjusting ad pricing based on advertiser redirection rates and statistical quality determinations computed from measured user responses to advertiser web sites that allow merchants who do not aggregate to compete fairly with ad aggregators to improve user experience.
2. Related Art
Online advertising is quickly growing industry. For example, one organization that provides online searches via a “search engine” reported revenues of over US$10 billion for the first three quarters of 2007 for embedding advertisements into search result pages generated in response to user queries entered into the search engine maintained by that organization. Much of this revenue comes from pay-per-click “search advertising” or “syndicated contextual advertising.”
Generally, in search advertising, advertisers bid to have short text ads shown with search engine results that are also clicked on by search engine users. The ads that are displayed are generally chosen through a generalized second price (GSP), auction or a Vickrey-type auction, which also determines the price each advertiser is charged when their ad is clicked. Advertisers are charged only when their ad is clicked, not when it is displayed. Unlike traditional advertising, search engine advertising is highly targeted both because the advertiser selects which search queries trigger the display of their ads and because search engines only display ads that are likely to be clicked. The existence of multiple search engines that offer auctions for pay-per-click search ads means that the sets of participants in these auctions can differ. Therefore, the per-click prices on different search engines can also differ.
In contrast, with syndicated contextual advertising the search engine “syndicates” the ads, which then appear on third-party publisher websites rather than on the search results page. Generally, the third party publisher has little or no control over the specific ads that are served on their site. These ads are also sold on a pay-per-click basis. However, in this case, the payment is shared between the search engine and the third-party publisher. In contrast to search ads, where the ads are chosen based on an explicit user query, in contextual advertising the search engine attempts to match the ads to the content of third-party publisher sites, usually based on site content. This matching theoretically provides users with links to other pages or products that might have some relationship to the page the user is currently viewing, and is this presumably interested in.
As with search advertising, syndicated contextual advertising ads are also selected through an auction. As noted above, in search advertising, advertisers bid in an auction to have their ads displayed on the results page for searches on particular keywords. In contrast, with syndicated ads, advertising, keywords are extracted from participating web pages, and advertisers bid in auctions to have their ads shown on pages that appear to correspond to particular keywords. Note that in both cases, these auctions are automated processes that generally operate based on maximum bids submitted by individual advertisers for each unique advertisement.
In either case, online advertisements (“ads”) are often ranked by expected cost per impression (i.e., the probability of click times bid), and the ads are displayed in the rank order, with higher ranked ads costing more money (i.e., requiring higher bids). When an ad is clicked, the advertiser is charged the minimum they would have had to bid to retain their rank. Users that click on these ads are directed to a webpage chosen by the corresponding advertiser. Thus, which ads are displayed and how much advertisers have to pay per click have nothing to do with how much value the advertiser's webpage delivers to the advertiser or to the user. In particular, reputable sites that sell the goods advertised on the ad pay the same as deceptive sites that promise cheap goods in their ad but then take the user to a page full of ads, or harvest personal information, as long as they have the same click-through-rate (CTR) or click-through probability.
The existence of both search and syndicated advertising markets has allowed the practice of “ad aggregation.” Ad aggregators place syndicated ads on their web pages, and then attract traffic to these web pages by placing search ads. They are profitable when they pay less for incoming clicks on their search ads than they receive for outgoing clicks on the syndicated ads that they host. Because ad aggregation involves buying clicks in one market and selling them in another for a profit, this practice is sometimes referred to “click arbitrage.” However, in contrast to true market arbitrage, which is generally considered to increase market efficiency, click arbitrage is generally considered to have a negative effect on both individual users and on true merchants that are attempting to advertise their goods using either search advertising or syndicated advertising.
In particular, a closer examination of ad aggregation reveals that it is not simply arbitrage. For example, ad aggregators generally attempt to induce incoming users to click on multiple syndicated ads, thereby generating higher revenue for themselves. In this process, the term “redirection rate” is used to denote the number of outgoing syndicated clicks an aggregator gets per incoming click. When an aggregator's redirection rate exceeds unity, they are able to sell more clicks than they buy. As a result, ad aggregators are profitable even if their buying and selling per-click prices are the same. This contrasts with arbitrage, which can only be profitable in the presence of a price imbalance.
Such practices are considered to harm both individuals and true merchants attempting to advertise their goods, since when ad aggregators win advertising slots, instead of merchants, they prevent consumers from reaching merchants directly. Unfortunately, most merchants cannot compete with ad aggregators since the aggregators are generally willing to pay higher prices for clicks, since they expect to resell more clicks than they pay for. In fact, it has been observed that the majority of the top advertisers in a real ad market are aggregators that use this advantage to displace merchants from advertising slots.
Therefore, aggregators who achieve high redirection rates directly displace merchants since the aggregators bid more than the merchants are willing or able to pay. Further, the user experience is degraded by the practice of ad aggregation since the ad aggregator specifically designs their pages to capture the users' attention and induce them to click on more syndicated ads, rather than specifically designing their pages to provide what the user may actually be looking for. In fact, what the user generally wants, but rarely receives, is an ad that links them directly to the merchant that is selling the product that they are specifically looking for.
Recently, quality issues have begun to receive some attention. For example, one conventional search engine uses a “quality score” as a dynamic variable assigned to each keyword (i.e., a word included in the user's search query). This quality score is calculated using a variety of factors, and generally measures how relevant a particular keyword is to the ad text and to a user's search query. These quality scores then influence the position of ads on the search results page. Further, the quality score is also used in part to determine minimum bids for particular keywords. In general, the higher the quality score, the better the ad position and the lower the corresponding minimum bid. In general, the “formula” for calculating the “quality score” of this conventional search engine varies depending on whether it is calculating minimum bids or assigning ad position. It also varies based on whether it is affecting a keyword-targeted ad on a search network, a keyword-targeted ad on a content network, or a placement-targeted ad.
In other work, one conventional study models user attention, user surplus, and the resulting externalities of advertisers on each other. In particular, a model is suggested wherein users incur a “cost” every time they click on an ad, gain a “constant utility” when their need is met from an ad, and decide to stop browsing further ads when the cost of another click exceeds the expected benefit of continued browsing. This model illustrates some of the excess negative externality imposed on other advertisers by advertisers that have high click-through probability and high bid, but low probability of meeting the user's need, as such an advertiser would reduce the user's expectation of the utility of continued browsing.
This work then proposes a mechanism that takes into account the advertisers' probabilities of meeting a user's need, and describes how such a mechanism maximizes user surplus. However, while the study describes how “search-diverting sites” can lead to merchants dropping out of the publishing engine's auction, the proposed model described therein assumes counterfactually that all advertisers derive an expected per-click payoff given by the advertiser's probability of meeting the user's click times a constant. In other words, this study erroneously assumes that an advertiser's payoff is contingent on meeting a user's need, and that meeting a user's need results in the same payoff for all advertisers. As such, the concept of ad aggregation is not properly considered or modeled.